March inflation comes in at 1.8 percent

By Fermín KoopHerald Staff

A sharp decrease is seen from April’s 2.4% amid significant deceleration in food prices

Prices rose 1.8 percent in April, according to the government’s consumer price index released yesterday, which showed a larger deceleration than expected in prices across the board. The steep drop was in large part due to the large deceleration in food and beverage prices from 2.4 percent in March percent to 1.1 percent in April as a consequence of the Price Watch programme, Economy Minister Axel Kicillof said. “Last month we saw a steep deceleration if compared with previous months. There was an exceptional expansion of prices in January and February but we were able to fight unjustified hikes,” Kicillof said at a press conference alongside INDEC statistics bureau Director Ana María Edwin and INDEC Technical Director Norberto Itzcovich. When added to an official inflation rate of 3.7 percent in January, 3.4 percent in February and 2.6 in March, the government estimates prices have risen 11.5 percent in the first three months of 2014, exceeding the 10.4 percent that was estimated in this year’s Budget for the entire year. Twenty percent inflation would be reached at the end of the year, several economists told the Herald. The government’s consumer-price index released yesterday showed a deceleration in prices across the board, with decreases in most of the categories if compared to March. Health care costs rose one percent, transport increased 2.3 percent, home supplies 1.7 percent, food and beverages 1.1 percent, education 2.3 percent and garments 2.5 percent. The exceptions to this broad deceleration included leisure activities which rose 1.9 percent, and housing and basic services which increased 3.1 percent as a consequence of the cut to subsidies for natural gas and water. Looking closely at the report, water rose 24.2 percent and household energy, which include natural gas, went up 13.9 percent. Once again, Kicillof blasted private consultancies that consistently release figures that are higher than the INDEC.“The deceleration in prices we have been observing is now confirmed with April’s figures” Kicillof said. “Consultancies, which have inconsistencies and haven’t divulged their methodology yet, also reported a deceleration last month. There’s still disparity and a lack of rigour among all of them.”Monthly inflation was less than what the market expected since the average prediction among economists surveyed by Reuters was that INDEC would report inflation at 2.1 percent. Meanwhile, local consultancies predicted an inflation rate that varied from two percent to 2.6 percent, hinting at the disparity Kicillof had reported.“Deceleration of prices didn’t happen because of the success of the Price Watch programme, it occurred because of Central Bank’s monetary policies to hit the brakes on the exchange rate,” Marina Dal Pogetto, economist at Bein consultancy, said. “What happens next month will depend on what the Central Bank does and on the decision taken on energy rates.”Yesterday’s report was the fourth edition of the IPCNu — as the national CPI is formally known — and is the result of a year-long effort to reform the methodology behind INDEC’s inflation calculation after the International Monetary Fund censured the country over unreliable and distorted data. It surveys prices on the national level, replacing its previous approach, which only extended to Greater Buenos Aires.

A low figure to comeAs April’s inflation was revealed yesterday, economists began immediately thinking about May, with experts from both sides of the aisle largely agreeing that the price index will be lower this month and next. Measures taken by the government and the effects of January’s devaluation subsiding, were on top of the list of reasons.“I was expecting this type of figure, which will be followed by lower inflation in May and June. There’s a deceleratory trend in prices that will continue,” Agustín D’Attellis, economist and member of La Gran Makro pro-government group, told the Herald. “This isn’t only only because of the Price Watch programme — it’s the result of the economic policies implemented by the government.”For his part, Luciano Cohan, chief economist of Elypsis consultancy, who expressed doubts about INDEC’s figures, anticipated that May is already showing lower figures than April and said the “trend will continue,” with inflation of between 1.2 percent and two percent next month. DyN contributed to this report